A MAN accused of murdering a missing businesswoman confessed to killing her and said he disposed of her body in a furnace, a court has heard.

Peter Haddley, 26, said he and Colin Coats were friends when they were prisoners in Addiewell jail, West Lothian, after Coats was arrested on suspicion of murdering Lynda Spence, who disappeared in April 2011.

Mr Haddley said Coats told him he had "cut off her head" and that he had to increase the temperature of the furnace he had put her body in because there was "still parts of it left".

At the High Court in Glasgow today, where Coats, 42, is on trial along with three co-accused, Paul Smith, 47, David Parker, 38, and Philip Wade, 42, the witness also said he was asked to arrange a reported sighting of Ms Spence in Manchester.

The four men deny kidnapping Ms Spence, 27, holding her at a flat in West Kilbride, Ayrshire, and torturing her for up to a fortnight before murdering her.

Mr Haddley said he and Coats exchanged letters which were written in code, referring to their arrangement to organise a sighting of the missing woman as "the game".

Solicitor general Lesley Thomson, prosecuting, asked Mr Haddley what Coats told him about Ms Spence, to which he replied: "I was told that he had killed her in a flat and disposed of her body on a furnace.

"It was a long conversation but he just kept going back to the same two points I've just told you about."

Ms Thomson asked if Coats told him anything about the method used and Mr Haddley said: "He cut her head off."

The witness also told jurors Coats said to him there were other people present when Ms Spence was killed, but he did not say that anyone else was directly involved.

When told about how he disposed of her body, Coats apparently told Mr Haddley he had to set the furnace to a "higher degree" because there was "still parts of it left", the court heard.

Ms Thomson asked: "Were you asked to do anything?"

The witness said: "I was asked to try and get a reported sighting of Lynda Spence in Manchester."

Mr Haddley said he was to get in touch with a solicitor he knew and ask them to report it.

He told the court that although he agreed to do it, he took no steps to make the arrangement.

"I had no means or ways of doing it anyway," he said.

Part of one of the letters, which Mr Haddley agreed was sent to him by Coats, was read to the court.

It said: "If you are having issues with the current games don't feel pressure buddy."

Ms Thomson asked the witness: "Who was to organise the female to play the role of Lynda Spence (for the sighting)?"

He responded: "No one. We never got that far."

The solicitor general said: "But that would have been required?"

"Yes," Mr Haddley replied.

He also told jurors there was some discussion of payment for the person who was able to arrange a sighting, but that no sum of money was set.

The letters exchanged between the two prisoners were later seized by police.

A statement Mr Haddley gave to police was read out in court after he told the solicitor general he could not remember anything else about his conversation with Coats.

It said: "He (Coats) told me he had killed her, she had tape over her mouth and he held her nose until she died."

The statement also said that Coats had told him he took "personal satisfaction" in killing Ms Spence because she had taken £10,000.

It went on: "After she died he said he had cut her head off. This was all in a flat he said the police had searched.

"He said they used plastic-like thick cling film, he said they cleaned the flat up. He mentioned her body was in pieces when they cut her up.

"Colin called her husband to say Lynda owed him money and asked him where she was."

Mr Haddley, who is now a call centre branch manager, told the court today: "As far as I can remember the husband didn't care."

Under cross-examination, Derek Ogg QC, defending Coats, accused Mr Haddley of being a "malicious, self-serving liar", who made a story up for the police in order to secure "benefits" for himself, such as early release from prison or movement to an open prison or an English jail.

He said the witness's evidence was a "script" and the reason he had not remembered everything given in his police statement was because it was a lie.

Mr Ogg asked Mr Haddley where the furnace was that Ms Spence's body was allegedly disposed of, to which the witness said he did not know because he had not asked.

The lawyer pointed out that all of the information Mr Haddley had given to police could not be formally checked.

Referring to the part of Mr Haddley's statement in which he said Coats told him he had held Ms Spence's nose as a way of killing her, Mr Ogg said: "How could you possibly not remember that detail?"

Mr Haddley said: "I didn't want to remember it."

Mr Ogg: "It's because you can't remember something that is made up unless it is put in front of you. It's part of a script you have forgotten. The reason you can't tell us anything about the furnace is because that conversation never happened.

"What were you offered?"

Mr Haddley: "I was offered all sorts of things by the police - moving to an English prison, early release, moving to an open prison - all sorts of stuff."

The witness said later in the proceedings that he had not gained anything but "a lot of heartache and headache".

Mr Ogg put it to him that he had asked another prisoner, Mark Ferguson, to go along with the lie, but the witness said that conversation never happened.

Mr Haddley also told the court he had hand-written a description of Ms Spence given to him by Coats, which included her weight, build, different aliases she used and her parents' names.

The witness said the reason for setting the "look-a-like" up in Manchester was because the English solicitor who reported the sighting would not have been able to defend the "Lynda Spence" character under Scots law.

Mr Ogg suggested to the witness that "the game" Mr Haddley and Coats had communicated about was in fact to do with a plan to sell the accused man's Spanish villa by cash so it could go "under the radar", as if the authorities knew about it he would not get legal aid for the murder trial.

Mr Haddley said it was one of the things they had discussed, but he said "the game" referred to the sighting that was to be set up.

Mr Ogg accused the witness of perjuring himself.

"You are a malicious, self-serving liar who has turned table on Colin Coats in the most despicable way. That is what you have done here today, isn't it?"